MBA Programs Adopting Stricter Ethical Standards
The financial crisis and high-profile criminal cases have triggered initiatives throughout MBA programs to promote higher ethical standards. Similar to doctors and lawyers, movements in universities, such as Harvard and Notre Dame, support the expansion of professional codes of conduct for business executives. A New York federal judge, meanwhile, has upheld New York University's Stern School of Business's decision to deny an MBA degree to a student convicted of insider trading.
"Business schools are increasingly sensitive to be seen as operating in a transparent environment," John Fernandes, president and CEO of the Association to Advance Collegiate Schools of Business, explains in the Financial Times.
Kirk O. Hanson, executive director of the Markkula Center for Applied Ethics at Santa Clara University adds, "To tolerate the presence of an MBA who, while they were enrolled, has been convicted of a crime of dishonesty…sends the wrong message."
MBA Programs Support Professional Codes of Conduct
Wall Street veteran Terrence Keeley is funding a business plan competition at Notre Dame's Mendoza College of Business to expand the adoption of The Financial Hippocratic Oath.
"There's absolutely no way for us to proceed as a society--to have a useful conversation or promote the common good--without us trusting the system," Keeley explains on the Notre Dame's College of Arts and Letters website. "This is what led to my interest, along with a number of central bankers, to push the idea of a new code of ethics."
A seasoned investment banker and Notre Dame philosophy alumnus, Keeley says a growing number of financial professionals are voluntarily taking the oath, whose essence is the golden rule, "Do not do to others what you would not want done to you."
In 2009 Harvard MBA graduates also began taking a voluntary oath to promote the highest ethical standards throughout their careers, according to The New York Times. Business schools are also incorporating business ethics in classes and extracurricular activities.
"It is about moving from just teaching skills to teaching wisdom," London's Cass Business School Professor Paul Palmer tells The Guardian. "Making bad ethical decisions can be just as damaging to your career," he says.
An MBA Program Takes a Stand and Sets a Legal Precedent
A case involving an MBA student at New York University's Stern is the latest in high-profile criminal cases involving defendants with business school training. The outcome of the case, however, turned out to be somewhat different from previous cases. While working as an accountant at PricewaterhouseCoopers and studying part-time for an MBA at New York University's Stern, in 2005, Ayal Rosenthal received confidential information from supervisors that two other companies were close to announcing a merger.
According to the U.S. Department of Justice, Rosenthal, at the time also a certified public accountant, "immediately" informed his brother Amir, a lawyer and an investor, who traded options to profit if the share price of a merger party rose.
In 2007, already in the midst of a federal investigation, Rosenthal pleaded guilty to conspiracy to commit securities fraud. That summer, he served two months in prison. When New York University's Stern learned about Rosenthal's insider trading conviction, the business school decided not to grant him an MBA degree. Rosenthal sued the institution.
In the Ayal Rosenthal against New York University case, Federal Judge Lewis A. Kaplan ruled in favor of New York University.
"Indeed, Stern appropriately emphasizes business ethics as a 'central and integral component of its business education program,'" Kaplan explains in his written memorandum opinion. "Rosenthal's admitted felonious conspiracy to commit securities fraud therefore is a violation of the Stern Code of Conduct."
Consequently, Kaplan says New York University doesn't have a legal obligation to grant Rosenthal an MBA degree or damages. Mark K. Schonfeld, director of the U.S. Securities and Exchange Commission's Northeast Regional Office when charges were filed, describes the Rosenthal case as "particularly troubling."
He explains that Rosenthal's father, brothers and acquaintances were also involved in the five-year, $3.7 million insider trading scheme, including accountants and lawyers at major firms.
"These are professionals who understand their obligation not to use confidential information for their own benefit," Schonfeld says.
